As gold prices continue to hit fresh peaks, jewellers are offering hefty discounts on making charges to shore up muted demand in the festive season.
This is in sharp contrast to the pick-up in demand seen earlier this year after the Centre reduced the customs duty on gold to 6% from 15%.
Gold prices surged by Rs 750 to reach another record high of Rs 80,650 per 10 gram in Delhi on Monday, according to the All India Sarafa Association. Extending gains for the fourth straight day, silver prices spurted by Rs 5,000 to hit a fresh record high of Rs 99,500 per kg.
Globally, the yellow metal rallied for a fifth straight day, hitting a record high because of uncertainties over the US presidential elections and ongoing West Asia tensions, while silver soared to near 12-year peak. Spot gold gained 0.6% to $2,735.38 per ounce as of 1112 GMT after hitting an all-time high of $2,736.86 earlier in the session. US gold futures were 0.7% higher at $2,750.00.
“The surge in demand following the import duty cut, which coincided with some festivals, has been tempered by record-high prices,” Kavita Chacko, research head (India) at the World Gold Council, said in a market update. “… market reports indicate early signs of a resurgence in gold buying due to various ongoing festivals, with demand largely being driven by wedding purchases. Retailers are actively implementing marketing campaigns to stimulate sales. There is an expectation of an increased demand from rural areas, following favourable monsoons and higher crop sowing…”
Ashish Pethe, partner, Waman Hari Pethe Jewellers, said: “At such high prices, demand for jewellery is expected to be lower by 10-15%, compared to last Diwali sales.” This fall follows a 30% rise in prices. He said demand does not fall in proportionate with the rise in prices. So, in value terms, sales will be higher, but the volume will see a decline. He, however, expects the attraction for investing in gold coins to offset the fall in demand to some extent.
Surendra Mehta, national secretary, Indian Bullion and Jewellers Association, said: “The absence of sovereign gold bond issues so far this financial year is diverting some bond buyers to the physical gold market,” even at current prices.
Sanjay Jain, a jeweller in Chandni Chowk’s Dariba Kalan, told FE that not many customers are keen on buying new gold ornaments this year. “They are bringing in bars and biscuits and asking us to make ornaments.”
To lure customers, some top retailers are offering hefty discounts on making charges. Maharashtra’s PN Gadgil and Sons has announced a discount of up to 50% on marking charges while Tanishq is offering up to 20% off.
Sheetika & Yasha, founders at Amaltas Jewels, said they are offering 20% off on solitaires and 10% on smaller diamonds, including their gold-based jewellery. Malabar Gold & Diamonds is offering a 200-mg gold coin on purchase of gold worth Rs 50,000. Senco Gold & Diamonds is offering Rs 450 off per gram on gold jewellery, among other offers.
A veteran bullion analyst said following a record high gold import in August, September imports were lower at 92 tonne. The average monthly import for the month before Diwali festivals stands at 100 tonne. “Last month, jewellers were seen cancelling orders given to manufacturers because of high prices. Demand for new jewellery in exchange for old has been on the rise and over a third of sale of new jewellery is against exchange, helping jewellers to sell new designs.” High prices restrict the overall demand, but such exchanges are keeping new sales floating, he said.
Elevated prices have also resulted in spot market trading at a discount to the cost of import. Discounts have widened to $22 per ounce or Rs 600 per 10 gram.